The NBA has contacted the Commodity Futures Trading Commission, asking the federal agency to create a regulatory framework that would govern derivatives trading platforms like Kalshi that are offering sports betting contracts.
What’s the Problem?
The 38 states, soon to be 39 with Missouri expected to launch later this year, that have legalized mobile and/or retail sports betting all have state regulatory agencies that set the rules, award licenses, and keep the industry protected from unscrupulous sportsbooks and bad actors.
However, the recent surge in popularity of futures trading platforms, which began offering sports betting contracts during this past Super Bowl, has become a contentious issue for state regulators, sportsbooks, and stakeholders whose business is being deleteriously impacted by renegade competitors like Kalshi.
Uneven Playing Field Between Sportsbooks and Traders
Moreover, while sportsbooks must be licensed and follow the regulations stipulated by each state’s governing gaming bodies, the trading platforms operate in whichever market they choose and without having to be licensed or follow the rules set forth by the regulatory authorities.
Kalshi is the most popular of the trading platforms that are more commonly known for offering contracts on commodities such as silver, gold, and any number of other items. But they first caught the attention of the betting public when they began offering contracts on the presidential election, something traditional sportsbooks in the United States are not allowed to do.
Super Bowl Contracts Raise Eyebrows
But moving forward, Kalshi began offering contracts on the winner of the Super Bowl, much the way sportsbooks do. However, in the trading world, prices on contracts fluctuate much like the stock market and are not locked in as odds are in a traditional sports betting scenario. This has caused consternation for the entire gamut of sports betting stakeholders.
NBA Asks CFTC to Set the Rules
Several states have issued cease-and-desist orders to the trading platforms, but recent legal victories by Kalshi have state regulators and mobile sports betting operators on their collective heels and beseeching the Commodity Futures Trading Commission (CFTC) to rein in the trading platforms that are under its authority. A roundtable discussion sponsored by the CFTC was initially scheduled for the end of April, but that event was cancelled with no rescheduled date announced.
NBA Raises Integrity Concerns
Now the NBA is getting into the act, as the league is concerned about the lack of governance over the trading platforms that can ultimately impeach the integrity of the league. On May 1st, the NBA sent a letter to the CFTC that read in part:
“The NBA’s support for legalized sports betting has long been underwritten by our view that sports betting is made safer—both for our fans and for our league—when it is legal and subject to robust, sports-specific regulation,” the NBA wrote in the letter to the CFTC.
“In contrast to the many states that have dedicated sports betting regulatory personnel, there is no CFTC division dedicated to overarching, sports-specific oversight of these new betting markets.”
“If the CFTC does ultimately decide to permit the continued offering of sports event contracts, we encourage it to close this gap and to adopt a comprehensive regulatory and oversight framework analogous to those governing state sports betting markets, and to impose meaningful limitations on the continued expansion, via self-certification, of these markets into ever more exotic and narrow event propositions.”
